The cheapest phones are disappearing, and AI is the reason

What happened

Cheap phones are getting harder to find, and the AI boom is the reason. From April to June, sales of phones under $100 fell almost 60% from a year earlier, says the research firm IDC. Phone prices around the world are up about 15% this year, and new models cost about 25% more, says another firm, Counterpoint. In the U.S. the rise has been smaller so far, about 5%.

What's actually going on

Every phone has memory chips. Think of memory as the phone's desk space. The bigger the desk, the more the phone can work on at once.

AI tools like ChatGPT don't run on your phone. They run in data centers, which are huge buildings packed with computers. Those computers need far more memory than any phone. Big U.S. tech companies plan to spend about $870 billion this year building them out, according to S&P Global.

Just three companies make about 90% of the world's memory: Samsung, SK Hynix and Micron. Late last year, they sent most of their supply to AI data centers instead of phones and laptops, a research director at IDC told Rest of World.

So there's less memory left for phones, and it costs more. That hurts cheap phones the most. An expensive phone can soak up a price bump. A $100 phone can't. Phone makers in China, who build about 60% of the world's phones, have sharply cut back on cheap models, Counterpoint says. One of its analysts says phones that used to cost under $150 may soon cost $250, or even $300. He doesn't expect prices to go back to where they were. IDC expects the shortage to last well into next year.

In your life

If your phone works, keep it. This hits hardest if you buy cheap phones, like a first phone for a kid or a simple one for a parent. Expect fewer choices under $200.

Be careful about

Some phone makers are cutting memory and storage to keep prices down, IDC says. A phone with too little storage fills up fast. Check the specs, not just the price.

Where to get it

Nothing to buy. One easy thing to try: open your phone's settings and look at how much storage you're using. Then you'll know what you need next time.